Canada Competes

Who will Canada’s trade partners be in 2025?

Contributed to The Globe and Mail

It is easy to assume that Canada-U.S. trade will continue to dominate as it always has, and that Canada will trade little with fast-growing markets elsewhere.

But an important shift is under way. Though trade with the United States still accounts for the majority of Canada’s international transactions, it has not grown in real terms over the past decade. At the same time, Canada’s trade with fast-growing markets elsewhere is taking off.

Story continues below ad

A new report, What Might Canada’s Future Exports Look Like?, by The Conference Board of Canada’s Global Commerce Centre, shows that this shift will accelerate in the coming years. The report looked at how exports to Canada’s largest trading partners might change by 2025.

Without a doubt, the United States will remain Canada’s largest export market for the foreseeable future. But Canada’s exports southward will expand just modestly through 2025. And the share of our goods exports to the United States will drop from almost three-quarters in 2010 to just more than two-thirds in 2025, we expect.

By contrast, we expect Canada’s share of goods trade with booming China will expand to almost 7 per cent by 2025 from 3 per cent. The same goes for other fast-growing markets. The share of Canada’s exports to India will more than double, and will be roughly equal in size to the share of exports to our North American neighbour Mexico. Trade with Brazil will also double by 2025. The trade will still be relatively minor in dollar terms, but if the pace of growth continues, these amounts and shares will become more and more important.

We expect Canada’s export share to the Eurozone countries to grow as well, to 6 per cent in 2025 from 4.5 per cent in 2010. The Canada-European Union free-trade deal that is due to be completed in 2012 could give this an extra boost. But given the current Eurozone crisis, an alternative scenario could develop in which Canada’s trade with the EU could stagnate over the longer-term.

These changes in our trade patterns matter. Public policies and business strategies today need to respond not to historic or current trade realities but to where trade is going tomorrow.

For example, China has opened the door to a trade deal with Canada. Ottawa is no doubt weighing myriad factors as it determines how to respond. But it should not make its decision on the basis of current trade alone. A solid decision should consider the future business potential, where Canada’s goods exports to China could hit close to 7 per cent of our trade by 2025.

These trade shifts will present new challenges for business and government leaders. For example, if emerging markets continue to expand rapidly and demand for Canada’s raw materials soar, Canada may not have the transportation and port infrastructure in place to meet that demand. It takes years to build such infrastructure.

Ottawa has dramatically ramped up its trade and investment negotiations. Almost 20 deals are in the works or being explored. The federal government will need to set some priorities. Those priorities must reflect this historic shift in Canadian trade patterns that is already under way and poised to accelerate in the coming years.

Join the conversation on Canada's competitiveness by following Canada Competes on Twitter:@CanadaCompetes

Follow us on Twitter: @GlobeBusiness